CEO Jeffrey Boutelle Talks About How The NatureMade Maker Has Kept Up Its Pandemic-Era Growth And Is Innovating For The Future
In the vitamins, minerals and supplements category, Pharmavite is at the top. The parent company of brands including Nature Made, Bonafide and Uqora has been trusted by consumers for generations -- and experienced a pandemic boost that is still going strong. I talked to CEO Jeffrey Boutelle about how he keeps a legacy company in this space at the forefront of minds and health needs for consumers across the age and health spectrum.
This interview has been edited for length, clarity and continuity. It was excerpted in the Forbes CEO newsletter.
You were firmly entrenched in the company just in time for the Covid-19 pandemic. What was it like in the category at that time, when for the first year and change, taking supplements was one of few things consumers could do to stay healthy?
Boutelle: It was crazy, exciting and scary all at the same time. I joined in late 2017. At that point, we realized Nature Made was in a pretty good position in the marketplace, but the world was changing very rapidly around us. Consumer technology, competition, lots of new entrants into the category. We undertook a significant transformation to ensure that we could compete and grow in the future in this environment.
Our two primary focus areas were to overhaul supply chain, and to create and stand up a really strong innovation capability and pipeline. We invested a lot of resources, a lot of focus, a lot of dollars on those two areas.
When Covid hit, it's a darn good thing that we had focused on those two areas. We make all of our products ourselves. We have two -- pretty soon three -- manufacturing sites in the U.S. They went to 24/7, 365 overnight. The strain on the supply chain was pretty intense from a labor perspective, from raw materials coming in from overseas perspective, and so on. But we were ready to go because we had re-engineered the supply chain. It was durable and ready to withstand that shock.
The company hadn't really innovated much in the previous years, but we took the bold decision to put together a multifunctional standalone innovation group, tightly connected with marketing and sales. They were hunkered down doing a lot of work those two years leading up to the pandemic. As it happened, spring 2020 was when we were ready to come out with the results of all of that work. We launched [about] 26 new items in spring 2020, and about eight of those were immunity-based products. We were already pretty strong in immunity products like vitamin C, vitamin D, zinc, and so on.
We were in the right place at the right time with all of this innovation coming out. Covid hits, and a huge spike in demand. If you think back to those early days, people were scared. They turned to trusted brands across many categories, but especially in vitamins, minerals and supplements (VMS). Nature Made really benefited from that because over 50 years, we've worked hard to earn and build that trust with consumers, with a steadfast commitment to quality and transparency. People turned to us. They were very focused on proactive, preventive healthcare. That's a good trend that's sticking around. It's good for society.
People liked what they saw when they came to Nature Made. You had existing users doubling down on Nature Made. You had occasional users doubling down on Nature Made. You had new users coming into the franchise. I view the pandemic as one big trial and awareness event. You had lots of people trying these products and then looking at different regimens, too, beyond vitamins, thinking about healthy things like exercise and good nutrition.
During the pandemic, household penetration for the category and Nature Made spiked. The pandemic ends, household penetration for the category's back to where it was before. We've held. We have maintained our household penetration gains. People liked what they saw when they tried it. We've made significant efforts to maintain those users and maintain that trust.
Supplements are often seen as a category for older people. Since the pandemic started interest among younger consumers, how do you keep them in the category?
With younger consumers, it really comes back to listening and making sure that we are out there, understanding their needs and how they approach healthcare. The transformation we're going through now is moving from a vitamin company to a nutrition-powered wellness company, which is broad. That's a result of listening to consumers, because consumers will take vitamins, but they create holistic regimens. It may involve multiple things: nutrition, exercise, wearables, mental wellness. We're really evaluating and doing a lot of consumer work to understand what those regimens look like -- especially with younger folks who tend to be more actively engaged in these things -- and see how we can expand our brand, acquire different brands, or build new capabilities. We're not going to be in the wearable business, but there will be partnerships and licensing arrangements and things like that as we look to move more into holistic or integrated healthcare in the future.
Pharmavite has made some pretty large acquisitions. What are you looking for and how do you make them work for you?
For most of our 53 years, Pharmavite has been Nature Made, which is a big broadline brand. That's your letter vitamins, your daily essentials, your fish oils, your multivitamins. About half the category is broadline brands, and about one third of that is private label.
The other half of the category is specialty brands that are really specialized on specific things. An example is PreserVision by Bausch + Lomb -- eye experts. If they're offering a vitamin for macular degeneration, you're going to trust them. You're going to pay a premium price. That's what they do.
There's a ton of what we call specialty brands out there, and we identified the need to compete in that space. Concurrent with that, we identified women's health as a real focus area for us. The company that owns us, Otsuka, is a Japanese pharmaceutical company, also has a significant commitment to women's health. We acquired Uqora, which is a women's health specialty brand. Then we acquired Bonafide. Together, those two, plus our existing brand Equelle, really position us as a leader in women's health nutraceuticals in the U.S.
We're not looking to buy market share. What we're buying is capabilities and know-how entrance into a new space. With Bonafide, it is a one-plus-one-equals-three. They brought really strong DTC capabilities that we didn't have. They brought a really unique approach to R&D, very nimble, very focused in this underserved and under-researched segment of women's health. And they also brought a small sales force that calls on ob-gyns and educates the doctors. They talk about menopause symptoms and so on, and that's pretty unique in the VMS space -- it's a very pharmaceutical thing. That's a capability that we appreciate, and that we've brought into our portfolio as well.
Pharmavite is a market leader in many VMS categories, especially with Nature Made, which everybody has heard of and sees on the shelf when they're in the store. How do you stay the market leader, and continue to be innovative and interesting to consumers?
We have developed what I call an activity system. VMS is a very complex category, so we invest heavily in consumer understanding, technology, research, and so on. I always say that innovation is all about connecting the dots. I always tell our people, you can't connect the dots unless you know the dots. The way we stay fresh and ahead of the trends is by designing our organization. That multifunctional innovation team that I mentioned has evolved. We've got a very seamless group of innovation, R&D, market research, marketing and sales. At most places, you're going to see walls and departments between them. We go deep in these areas, and when you have that deep understanding of sales fundamentals, consumer trends, consumer insights and technology. You can crash all these things together: that's when the real ideas and innovation flow.
For me, in my role, I create and reinforce this environment of listening, connecting the dots, challenging each other. I could be accused of having dad jokes or that kind of thing, but one of my Jeff-isms is: You don't get the shine without the friction. Friction can be a good thing. It can also be a bad thing if done wrong, but this is the creative debate and dialogue. When I first got here, it wasn't part of the culture. It was viewed as a negative to disagree or to offer a different opinion. We created an environment where people are encouraged and free to do that, because that's where the magic happens. It's been working for us pretty well.
How do disagreements work out to be positive?
One of the first things I do when I get to a new assignment or company is after carefully diagnosing what you got to do, ensure that you have the leadership team that's built to that purpose. I did that here. I've got an amazing leadership team with diverse backgrounds, skill sets and personalities, but the chemistry is all there.
Early on, people would see us debating and dialoguing and disagreeing, and it worried them. It was almost like a kid seeing their parents argue. Then we talked to our organization: It's a good thing because we respect each other, and it's not done in a deconstructive way. We're really building on each other's ideas.
Another reason I build a good team around me is because I'll have a good idea every once in a while, but I can't think of everything. There's not one idea that I've ever had, no matter how good it is, that didn't get better when it was pushed and pulled at and challenged. That's really taken hold over the years here.
How is Pharmavite using technology and AI?
We're experimenting across a lot of fronts, but one of the areas that I am most intrigued about is in research. There's millions and millions of plant compounds out there in the world. We're partnering with a company that uses AI to screen plant compounds. What we do together is identify a receptor that will have a positive impact on a certain condition. If you screen for plant compounds that are going to trigger that response manually, that can take years. With AI, you can do that much more quickly and get a short list of compounds [to] test. It's been very effective, not only from the thoroughness of being able to evaluate, but certainly cutting a lot of time out of the process.
We've got two very promising compounds. We've gone through this whole process and now we're at the stage of doing clinical trials. We certainly want to be able to not only educate consumers, but make sure that we're backing it up with data.
What can we expect to see from Pharmavite in the next year or so?
We're not sitting still. We are opening up a brand new manufacturing facility in Columbus, Ohio, dedicated solely to the manufacture of gummies, now the leading form in VMS. It overtook within the last year soft gels and tablets and capsules. This facility will also house a gummy center of excellence as we look to innovate in this space. It's a fantastic facility and we've got a strong commitment to gummies. Younger consumers tend to look at the capsules and the tablets like pills, and gummies are much more approachable, more tasty and so on. There's a lot of growth ahead for gummies. It's a great combination of a sensory benefit, but then also us bringing our Nature Made know-how to gummies so that we're continuing to offer the best, scientifically backed potent vitamins that we can.
The other big thing that you can expect in women's health, we're launching just now Thermella by Bonafide, which is a hormone-free, prescription-free supplement that's a neurokinin B receptor antagonist. Basically, it's working with the same method of action as the current prescription options without the side effects, and at a supplement price, which is very favorable. This product has been clinically tested to reduce vasomotor symptoms such as hot flashes and night sweats, and it provides women affordable access to safe, effective menopause relief.